Making The Most Of Your Insurance Coverage

Step 1. Determine how much coverage you need. Don't go by your home's appraised value, which includes the land. Ask your local homebuilders association for recent per-square-foot replacement costs. If your area is prone to natural disasters, price out extended or guaranteed replacement policies to protect you from inflated labor and material costs after such events. With your home replacement taken care of, look at coverage for possessions, living expenses, and liability.

Step 2. Find out what's NOT covered. Standard policies don't cover damage from flooding, mudslides, and earthquakes. If you're in a flood zone, you may have to buy supplemental flood insurance. Most standard policies exclude mold, broken water mains, and sewer backups, but you can buy extra coverage for them.

Step 3. Examine your deductible. Some insurers are changing their deductibles from dollar amounts to percentages, which may turn out to be higher deductibles. If that's the case, check that your premium has been lowered. To reduce your premiums, you want to take the highest deductible you can comfortably afford.

Step 4. Focus on the premium. When you get your renewal, compare the new premium to last year's. If it's up more than 5%, ask for an explanation. Did your risk profile change, or the market? Try to lower your premium by bundling in auto insurance, installing a security system, storm shutters, or a new roof. But first check with your insurer.

Step 5. Keep records. Do a home inventory of everything you own. Add receipts, photos, or videos and store with all paperwork, including your insurance policy, in a fireproof box. As a backup, scan and store that info on a flash drive and keep it off-site.